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RE: INFOTERRA: Tough environmental standards yield unexpected profits for multinationals, stud
- Subject: RE: INFOTERRA: Tough environmental standards yield unexpected profits for multinationals, stud
- From: Paul Stoughton <email@example.com>
- Date: Fri, 1 Sep 2000 10:30:19 -0700
- List-Name: p2tech
- Reply-To: Paul Stoughton <firstname.lastname@example.org>
Thus, fiscal justification of what all of us know is right...
Paul E. Stoughton
Product Design Engineer
JAE Oregon Inc.
11555 Leveton Dr.
Tualatin OR 97062
(503) 692-1333 ext. 215
FAX (503) 692-6586
From: Burt Hamner [mailto:email@example.com]
Sent: Friday, September 01, 2000 9:29 AM
To: p2tech; one-l; ecdm; firstname.lastname@example.org
Subject: Fw: INFOTERRA: Tough environmental standards yield unexpected
profits for multinationals, stud
nice news about doing well by doing good!
----- Original Message -----
From: "Karen Claxon" <email@example.com>
Sent: Thursday, August 31, 2000 5:48 PM
Subject: INFOTERRA: Tough environmental standards yield unexpected profits
for multinationals, stud
> 31 AUGUST 2000
> Contact: Barry List
> Institute for Operations Research and the Management Sciences
> Tough environmental standards yield unexpected profits for
> multinationals, study reports; non-polluters average $10.4 Billion
> higher market value
> Contrary to the belief that multinationals suffer from environmental
> regulation, large companies that adopt strict global environmental
> standards in developing countries are rewarded with higher stock market
> performance, according to a study published in a journal of the
> Institute for Operations Research and the Management Sciences
> "We have found a significant and positive relationship between the
> market value of a company and the level of environmental standard it
> uses," say the authors.
> Of the companies examined in the study, firms choosing to employ their
> own strict global environmental standard abroad are found to have an
> individual value of approximately $10.4 billion higher than those using
> less stringent U.S. standards, after controlling for the influence of
> physical assets, capital structure, and multinationality.
> The authors write, "This paper refutes the idea that adoption of global
> environmental standards by multinational enterprises constitutes a
> liability that depresses market value. On the contrary, the evidence
> from our analysis indicates that positive market valuation is associated
> with the adoption of a single stringent environmental standard around
> the world."
> The study also warns developing countries that using lax environmental
> regulations to attract foreign direct investment may bring them poorer
> quality, less competitive firms.
> "Do Corporate Global Environmental Standards Create or Destroy Market
> Value?" is by Glen Dowell, University of Notre Dame's College of
> Business; Stuart Hart, Kenan-Flagler Business School, University of
> North Carolina at Chapel Hill; and Bernard Yeung, NYU Stern School of
> Business. It appears in the current issue of Management Science, an
> INFORMS publication.
> Tying Environment to Market Value
> The researchers investigated two questions:
> 1. Are multinational enterprises more profitable when they surpass lax
> environmental standards in developing countries? Phrased differently: Is
> adhering to stricter environmental standards associated with higher
> market value - or does it represent nonproductive use of assets?
> 2. Do improvements in environmental standards actually lead to increased
> market value?
> Addressing the second question, the researchers were unable to determine
> if environmental measures undertaken in one year result in higher market
> value in a subsequent year.
> Large Firms Polluting Less
> The researchers examined a sample of 89 manufacturing and mining
> companies headquartered in the United States that are included in the
> Standard and Poor's 500 Index. Only multinational enterprises that had
> production operations in countries with GDP per capita below $8,000 were
> The researchers measured a company's market value using a measure called
> Tobin's q, an indicator of intangible value often used by economists.
> Tobin's q is defined as firm market value per dollar of replacement
> costs of tangible assets. The sample period was 1994-1997.
> Companies' compliance with environmental standards was derived from the
> Investor Responsibility Research Center's Corporate Environmental
> Profile for the year's 1994-1997. The profile indicates if a multination
> firm adheres only to local standards, applies American standards abroad,
> or uses a stringent internal environmental standard that exceeds any
> national standard.
> Surprisingly, the researchers found that defaulting to lax local
> environmental standards is by no means the most common practice. Nearly
> 60% of the companies observed in this sample adhere to a stringent
> internal standard, compared to less than 30% that only enforce
> developing countries' standards. The authors suggest several possible
> interpretations for their findings.
> Public relations: Interest groups and non-governmental organization
> expose unsound corporate environmental practices, raise consumer
> awareness, and put pressure on governments to discipline polluters even
> if the pollution is in overseas locations. To avoid censure, many
> managers maintain a high level of environmental practice in all company
> Bottom line benefits: Choosing stringent environmental standards is more
> profitable than defaulting to lower or poorly enforced local
> environmental standards. The authors concede that the increased
> productivity observed in the study may be a result of using new
> technologies and equipment. Nevertheless, they suggest, firms that adopt
> high environmental standards are those that strive for eco-efficient
> production systems. The conscious policy to pursue technologies and
> processes that increase resource productivity of their operations has a
> positive result for the bottom line.
> Low performers race to the bottom: Economists sometimes interpret
> Tobin's q as a measure of firm "quality." In this instance, quality
> firms generate less pollution and strive to be the best in all their
> operations while lower-quality firms engage in what is described as a
> "race to the bottom" to gain short-term financial advantage.
> The Institute for Operations Research and the Management Sciences
> (INFORMSŪ) is an international scientific society with 10,000 members,
> including Nobel Prize laureates, dedicated to applying scientific
> methods to help improve decision-making, management, and operations.
> Members of INFORMS work in business, government, and academia. They are
> represented in fields as diverse as airlines, health care, law
> enforcement, the military, the stock market, and telecommunications.
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